Technology is always brimming with advancements, and it is more prominent in the financial sector. As financial institutions increasingly rely on digital infrastructure to enhance operations, customer experience, and security, they also face growing challenges in mitigating the risks that come with it, such as cyber threats, system failures, and other operational vulnerabilities.
To face these digital risks, the European Union introduced the Digital Operational Resilience Act (DORA), a regulation designed to ensure that financial entities can withstand and recover from digital disruptions.
So, what exactly is DORA, how does it help mitigate risks and maintain resilience within the financial sector, and how can businesses effectively prepare for its requirements? Let’s see.
This guide will help you to get an overview of DORA so that you can effectively navigate its compliance requirements and enhance your organization’s digital resilience in the financial sector.
What you need to know about DORA?
Due to the advancement of technology, there is always stiff competition among organizations serving in the same sector, and this also applies to financial entities. As per a survey conducted by Dragonfly Financial Technologies at the beginning of the year 2024, 92% of banks planned to maintain or increase their technology investments in 2024.
Since banks are a crucial part of the financial ecosystem, their actions have a ripple effect on other financial entities, so this shows how crucial it is for financial institutions to stay ahead in their digital transformation journey. At the same time, it shows the need for secure systems and frameworks to counter the digital threads that come along with the advancements in technology.
Digital Operational Resilience Act is a new regulation (EU) 2022/2554, published in 2022 in the Official Journal of the EU, and came into force on 16 January 2023. It is a security based framework designed to strengthen the digital resilience of financial institutions by ensuring they can withstand and recover from IT-related disruptions such as cyberattacks, system outages, and data breaches.
By implementing DORA, the EU seeks to create a unified approach across its member states, ensuring a higher level of digital operational resilience and mitigating the risk of widespread disruption in the financial system.
The financial entities operating within the EU, as well as third-party service providers outside the EU that engage with financial institutions located within the EU, are required to comply with DORA by 17 January 2025.
After this deadline, non-compliance could lead to legal consequences and penalties, including fines of up to 2% of an entity’s annual global turnover or periodic penalties based on average daily turnover until compliance is achieved.
The purpose of DORA Compliance
At its core, the purpose of DORA compliance is to ensure that financial institutions maintain high levels of digital operational resilience and aims to:
- Protect the Financial System: DORA ensures that financial institutions remain operational, even in the face of major digital incidents.
- Promote Confidence: By setting strict standards, DORA builds consumer and market confidence in the stability of financial services.
- Harmonize Regulations: DORA creates a uniform set of rules across the EU, eliminating the inconsistent regulatory frameworks currently in place.
Who will DORA apply to?
DORA applies to a wide range of financial entities that are either based in the European Union or operate within its financial ecosystem. Here are the 21 entities that fall under the scope of DORA:
- Banks
- Credit Institutions
- Payment Service Providers
- Electronic Money Institutions
- Investment Firms
- Asset Management Companies
- Insurance Companies
- Reinsurance Firms
- Central Securities Depositories (CSDs)
- Credit Rating Agencies
- Securities Trading Venues
- Central Counterparties (CCPs)
- Pension Funds
- Investment Funds
- Crowdfunding Platforms
- Payment Systems
- Data Reporting Services Providers
- Financial Market Infrastructures (FMIs)
- Credit Unions
- Financial Holding Companies
- Outsourced ICT Providers for Financial Institutions
5 Pillars of DORA Compliance
1. ICT Risk Management
The first pillar of the DORA ICT risk management implies that financial entities must implement strong risk management frameworks to identify, assess, and mitigate risks related to Information and Communication Technology (ICT). This includes regular risk assessments, controls, and monitoring mechanisms to address vulnerabilities and threats.
2. Incident Reporting
DORA mandates timely and standardized reporting of significant ICT-related incidents, such as cyberattacks or system failures. This ensures that supervisory authorities are informed promptly and can respond effectively to mitigate further impact.
3. Digital Operational Resilience Testing
Financial institutions must regularly test their operational resilience through various means, such as penetration testing, vulnerability assessments, and simulation exercises. This ensures that systems can withstand and recover from disruptions.
4. ICT Third-Party Risk Management
Since financial entities often rely on third-party service providers (such as cloud services), DORA ensures that these providers will meet resilience standards, by including comprehensive risk assessments, contractual obligations, and regular monitoring of third-party services.
5. Information Sharing
DORA encourages financial institutions to share information related to cyber threats and vulnerabilities with one another and relevant authorities to improve collective security. This helps create a collaborative environment for managing emerging risks in the financial ecosystem.
These pillars work together to create a DORA framework that enhances the overall digital resilience of financial institutions, ensuring they are prepared for any technological disruption.
How VISTA InfoSec can help you achieve DORA compliance?
Achieving full compliance with DORA’s regulatory requirements can be a complex and resource-intensive process. This is where VISTA InfoSec’s expert consulting and audit service comes into play. As a trusted name in cybersecurity and compliance (since 2004), we offer tailored solutions to help financial institutions navigate the complexities of DORA.
Our DORA Compliance and audit service includes a thorough gap assessment to identify areas where your organization may fall short, followed by the development of risk management frameworks, operational resilience testing, and then third-party risk assessments.
We also assist with setting up incident reporting structures and ongoing monitoring, ensuring your organization remains compliant with evolving regulations and resilient against digital threats ensuring your organization not only meets DORA’s stringent standards but also strengthens its overall digital operational resilience.
When your organization is fully ready, our independent audit arm, will then conduct the final audit and issue the report as required. Post audit, we are always there to support you in answering questions and interactions with your team members.
With our global presence in the USA, UK, Singapore, India, Middle East, we provide unmatched industry expertise and collaboration throughout the entire compliance process. Schedule a free one-time consultation on our website www.vistainfosec.com and get your journey started with expert guidance tailored to your specific compliance needs.
